Out with the old, in with the new in Poland

Out with the old, in with the new in Poland

With Arx Equity announcing it will no longer invest in Poland, and CVC having recently transacted in the country, the Polish private equity market is witnessing sweeping changes. Mikkel Stern-Peltz reports

In October, veteran CEE buyout firm Arx Equity Partners said it would make no new investments in Poland, deciding instead to refocus its efforts in other countries in central and eastern Europe. The GP will invest mainly in the Czech Republic, but has not ruled out sporadic deals in other geographies. Its Warsaw office will remain open for at least as long as Arx still has assets in the country.

Poland is considered the largest and most mature private equity market in the CEE region. While deal value has slumped since the end of 2013, the market has seen the highest level of activity across the CEE region this year, continuing its popularity with GPs. In the past five years, according to unquote" data, Poland has seen 57 deals, with a total buyout value of nearly €3.5bn, making it the most active market in CEE, with Russia's €3.3bn total deal value and Turkey's €3bn putting them in second and third, respectively.

Despite having a substantially smaller population than Turkey or Russia, Poland's EU membership is a significant factor in why private equity has favoured the country, as illustrated by the huge increase in buyout activity since the country gained membership in 2004.

Road to recoveryDeal activity had been solid from the beginning of 2010 onwards, with 2011 taking the 10-year record with more than €1bn in total deal value from 12 deals. Following a disastrous 2014, there was a substantial rebound in volume and value in H1 2015: the first six months of the year saw seven deals worth a total of €323m, according to unquote" data. By contrast, last year saw the lowest total buyout value in a decade with just €68m in total deal value from five transactions, casting a shadow on what had otherwise looked to be a market on the road to a solid recovery post-financial crisis.

Though activity in H2 2015 remains low, some people in the industry have suggested CVC's investment in Polish Railways energy unit PKP Energetyka is a case of a big player testing the waters, before diving into further investments in the country. One leverage finance head at a major western European bank said CVC's investment and subsequent office opening could be the precursor to more of the major European buyout houses taking an interest in Poland and the CEE region in general.

Including CVC's €477m deal for PKP Energetyka in the buyout figures – the deal is categorised as project finance in unquote" data – total deal value for H2 2015 is pushed above the €500m mark.

This would make 2015 the year with the second highest level of private equity deal value for 10 years. It would still be around €200m below 2011's level – the only year where total deal value broke €1bn in Poland since unquote" data began tracking the market in 1996.

On the exit front, Poland remains strong. This year, there have been nine exits totalling €663m, putting it just €80m short of the second most active year in the past decade and €290m short of the 10-year record of €952m set in 2013.

unquote" Events

We have been researching the markets for over 30 years and that’s how we've become the leading European private equity specialists.
Join our events for intelligence and analysis based on verified information and hard facts, not rumour and speculation.